Research Papers

Detection of Economic Areas in Japan Using Inter-firm Transaction Data

Proceedings of European Regional Science Association’s 57th Congress

Functional region (e.g. employment area or commuting zone) plays an important role in understanding the actual conditions of local socio-economic activities. The definition of a functional region, however, tends to be implemented strongly in large administrative districts, such as prefectures, and there are no unified views on how to define the functional region based on actual interregional connectedness. Under the circumstances, recently the investigations regarding the methodologies to define the functional region from social network structure have been conducted, applying the method of community detection based on modularity index. While many studies have addressed the definition based on a person's activity, little is known about the definition based on a firm's activity. The aim of this study is to define a functional region using inter-firm transaction data, based on community detection method, and implement the comparison between the results obtained and commonly used administrative district. In this research, we used inter-firm transaction data held by Teikoku Databank LTD, a private credit research company. They interview each company by direct visits and collecting information about business partners so that they can grasp business relationships between companies. This study contributes to the detection of hidden interregional clusters omitted within the purview of the existing administrative district and a presentation of quantitative implication for the decision making toward inter-municipal cooperation.